On February 2, 2018, the Comptroller issued a press release announcing that he has suspended the processing of electronic tax returns for nine additional tax preparers.  A copy of the press release can be found here.)  The Comptroller acknowledged that these preparers were suspended based upon technology designed to spot instances of fraud used by the Comptroller’s Questionable Return Detection Team.  The preparers affected by this suspension include:

  • Magino & Associates, 18943 Red Robin Terrace, Germantown, MD 20874
  • Accurate Taxes, 616 E. Patapsco Ave., Brooklyn, MD 21225
  • 1-866MoblTax Inc., 4812 St. Barnabas Road, Suite 6, Temple Hills, MD 20748
  • R & M Hannan LLC, 7751 Baltimore Annapolis Blvd., Glen Burnie, MD 21060
  • Rhonda’s Tax Service Inc., 5801 Allentown Road, Suite 303, Suitland, MD 20746
  • A & R Tax Accounting Service Inc. (aka A R TAX AND ACCOUNTING INC), 47 Peabody St. NE, Washington, DC 20011
  • Tax Time, 3902 Ednor Road, Baltimore, MD 21218
  • Jackson Hewitt Tax Service, 1912 Forest Drive, Annapolis, MD 21401
  • Precise Tax and Accounting Service, 7521 New Hampshire Ave., Takoma Park, MD 20912

These suspended tax preparers join a list of at least 95 other tax preparation businesses that have had services blocked over the past few years by the Comptroller.  According to the Comptroller, these efforts have blocked more than 88,000 fraudulent returns and $190.2 million in fraudulent refunds since 2007.

For the clientele of these tax preparers, the suspensions can have a significant and immediate impact.  To start, many may need to re-file their tax returns (if they were blocked).  Even for those that were not blocked, clients may want to consider filing amended returns, particularly if they have reason to believe the initial filing was inaccurate.  To make matters worse, clients are likely to be subject to audit by the Comptroller and may have their refunds, even if valid, delayed pending further investigation.  Individuals receiving notification from the Comptroller regarding a blocked tax return should contact a tax attorney to discuss the potential consequences of this action.

And while blocked tax returns are certainly an issue, suspended tax preparers likely face a number of additional, and more significant, enforcement actions.  In many instances, the suspension of e-filing will prevent tax preparers from filing any tax returns at all on an indefinite basis – and could effectively eliminate their livelihood.  In many scenarios, the Comptroller share information with the Department of Labor, Licensing, and Regulation (“DLLR”).  DLLR will often begin a related investigation based on this information and may seek to revoke licenses and impose civil penalties.  After suspension, the Comptroller frequently conducts its own investigation to determine if additional penalties should be brought against the tax preparer or its clients.  For the most part, resolving the issue and restoring filing permissions will require considerable time and effort.  This is often time that tax preparers cannot spare during tax season.

Finally, for certain tax preparers, there may even more significant consequences.  At the behest of the Comptroller, the Attorney General recently began criminally investigating certain tax preparers.  Many of these tax preparers were amongst those who initially had their filing privileges suspended by the Comptroller a few years ago.  A press release from several indictments filed against Maryland tax preparers can be found here.  In each of these cases, the tax preparers were prosecuted from criminal offenses relating to the preparation of fraudulent tax returns and/or felony theft (i.e., for effectively stealing money from the Comptroller by aiding in the preparation of fraudulent returns).  Each of the defendants named in these indictments was ultimately sentenced to at least one felony count and faced significant incarceration and/or criminal fines.

Tax preparers who have had their electronic filing privileges suspensions should strongly consider consulting with a tax attorney upon first receiving notification from the Comptroller.  Aside from immediate concerns regarding the ability to file, these suspensions may only be the first step in the process of further civil and criminal sanctions.  It is important that affected tax preparers know their rights to avoid helping the Comptroller build a civil or, worse yet, criminal case against them.

These descriptions are intended for informational purposes only and should not be taken as legal advice on any particular set of facts or circumstances.  Rosenberg Martin Greenberg, LLP is experienced in all aspects of federal and state tax laws, including criminal tax matters, addressing prior compliance issues, white collar criminal litigation, litigation of tax penalties, and more.  Please contact Brandon Mourges at 410.951.1149 or bmourges@rosenbergmartin.com for a free consultation.